Chapter 11 Flashcards
What is the primary purpose of accounting?
A) To communicate financial information about a business to relevant parties
B) To ensure the company pays the minimum amount of taxes
C) To manage the company’s hiring needs
D) To oversee the marketing department
a
What distinguishes financial accounting from managerial accounting?
A) Financial accounting involves record-keeping only
B) Managerial accounting is strictly for external reporting
C) Financial accounting focuses on reporting to external parties; managerial accounting is for internal use
D) There are no significant differences; both serve the same purpose
c
What is the basic accounting equation?
A) Assets = Liabilities + Owner’s Equity
B) Assets = Liabilities - Owner’s Equity
C) Owner’s Equity = Assets + Liabilities
D) Revenue = Expenses + Assets
a
How do balance sheets serve an organization?
A) By outlining the marketing strategies
B) By detailing the employee salaries
C) By showing the financial position at a specific point in time
D) By describing the company’s operational strategies
c
What role does the income statement play in accounting?
A) It shows the company’s revenues and expenses over a specific period
B) It is used to predict the stock prices
C) It details the company’s new product plans
D) It tracks employee performance metrics
a
What is the purpose of cash flow statements?
A) To show the flows of cash in and out of the business over a period
B) To record the cash sales only
C) To monitor employee cash advances
D) To track non-cash transactions
a
How is financial analysis used in business?
A) To decorate the office
B) To assess the business’s financial health and guide decision-making
C) To monitor social media trends
D) To create advertisements
b
What is the importance of financial ratios?
A) They provide a numerical assessment of the business’s performance
B) They are irrelevant to modern businesses
C) They are used for employee evaluations
D) They determine the company’s website design
a
How does accounting support strategic planning?
A) By providing financial insights that guide long-term business decisions
B) By offering legal advice
C) By managing customer complaints
D) By overseeing the production department
a
What is the role of ethics in accounting?
A) It has no place in accounting
B) It ensures transparency and trustworthiness in financial reporting
C) It is only necessary during audits
D) It is about finding ways to increase profits through creative accounting
b
Which statement about financial accounting is incorrect?
A) It is primarily concerned with recording past financial transactions.
B) It focuses exclusively on helping managers make future business decisions.
C) It involves preparing financial statements.
D) It provides information to external stakeholders.
b
Managerial accounting does not typically include:
A) Detailed financial analysis for internal use only
B) Preparing external financial reports for shareholders
C) Budgeting and financial forecasting
D) Cost analysis and internal controls
b
Which is not a primary role of a certified public accountant (CPA)?
A) Auditing financial statements
B) Providing legal advice
C) Offering tax services
D) Consulting on financial planning
b
The balance sheet does not show:
A) The company’s assets
B) The company’s liabilities
C) The company’s equity
D) The company’s future profitability projections
d
Which of the following would not be found on an income statement?
A) Revenue
B) Cost of goods sold
C) Cash reserves
D) Expenses
c
